Senate Democrats voted Wednesday to raise taxes on a struggling economy at a time of rising unemployment and slowing economic growth.
Dismissing months of statistics showing the economy may be on the cusp of a double-dip recession, Democrats passed the tax bill by a thin 51 to 48 margin to show their support for President Obama's failed economic policies.
The Democrats' action represented the triumph of their party's ultra-leftist, class warfare ideology over economic common sense. Two Democrats (James Webb of Virginia and Joseph Lieberman of Connecticut) voted against it. No Republican voted for it.
Think for a moment what was going on in the real world outside the clubby, high income, leather-seated Senate chamber as Democrats cast their votes.
Manufacturing and exports are weakening. Retail sales were down three months in a row. Business economists were lowering their growth forecasts to somewhere in the 1 percent range. Unemployment was stuck at 8.2 percent and will likely move higher. Wages are stagnant. Small businesses, who will be hit hard by the Democrats' tax hike, are in a survival mode. And life in Obama's America is getting progressively worse.
A survey this week reported that the poverty rate has climbed from 15.1 percent of the population in 2010 to 15.7 percent in 2011.
Former President Bill Clinton recently warned his party, and Obama, that this is the worst time to raise any taxes, urging that all the Bush tax cuts be extended at the end of this year for the time being.
Fed Chairman Ben Bernanke, in testimony before the Congress last week, pointed out that the economy was still in a fragile, weakened state and lectured lawmakers to "do no harm" in its decisions on taxes and spending cuts.
The bill Democrats embraced would retain all of George W. Bush's income tax cuts for low and middle income Americans, but raise them on upper income earners.
This means the 28 percent tax rate would climb to 36 percent and the 35 percent top rate would soar to 39.6 percent.
They would hit individual single filers earning more than $200,000 a year and married couples earning more than $250,000 a year.
It would hit millions of small business employers who choose to file their taxes as individuals -- a major sector in the economy that creates much if not most of the jobs.
A statement issued by the White House said nothing about the puny growth and job statistics that continue to bombard the business community and millions of ordinary unemployed and underemployed Americans.
Instead, the president continued playing the politics of class warfare, saying, "Our economy isn't built from the top down, it's built from a strong and growing middle class, and that's who we should be fighting for."
Actually, what he and his fellow Democrats are doing in this bill will hurt the very middle class he says he wants to help, by slapping small businesses with higher tax rates that will mean job layoffs now and less hiring in the future.
But wait, there's even more economic damage to come from the Democrats' tax hike package. It will also raise the federal tax rate on investment income from 15 percent to 20 percent.
That won't help the middle class, it will hurt it on multiple levels. It hurts millions of elderly Americans whose income comes from capital gains and dividends derived from a lifetime of investing for their retirement. It shrinks investing in the larger economy which will hurt business expansion and job creation.
Obama says he wants an investment led recovery, but how can you boost investment by taxing it more?
The higher tax rate will also worsen the budget deficit. When capital gains taxes have been raised in the past, federal revenues have fallen because people will hold on to investments rather than get slapped with a higher tax. When the tax has been cut, revenues rose as investors sold equities to seek better returns on their investments.
After Bill Clinton signed a GOP capital gains tax cut in 1997, capgains tax revenues soared from $62 billion to $110 billion, capital investment in the economy climbed, and the economy took off in a high- tech-led expansion.
Senate Republican Leader Mitch McConnell of Kentucky called the Democrats' vote "a purely political exercise" and "a total waste of time."
In his floor remarks, McConnell remembers that Senate Democrats were singing different tune about the Bush tax cuts in 2010. He recalled Vice President Biden, who was sitting in the chair during Wednesday's vote in case he had to break a tie, came to him near the end of 2010 to help extend all of the tax cuts, even the top two tax rates Obama says he now opposes.
Back then, the Republicans had taken control of the House, picked up six seats in the Senate, and the Obama economy was in a nosedive. A beaten president bought into the GOP's plan to keep all the tax rates right where they were for two more years.
But what's changed since then? The jobless economy is in a steeper decline, the middle class is struggling more than ever, and poverty is rising.
"The U.S. economy is teetering on the brink of another recession," says University of Maryland Business School economist Peter Morici. "Get ready for a bad ride."
The tax hikes the Senate just passed are going nowhere in the House where Republicans plan to vote next week to extend all the Bush tax cuts for another year.
But half a dozen very vulnerable Senate Democrats are going to pay a political price for this vote when they face the voters in November, as will Obama.
The Gallup Poll reported Thursday that business owners are "now among the least approving of Obama", falling to 36 percent in the second quarter.
The Republican war cry this fall will be "Americans have been taxed enough."
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